What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-02-03 compared with 2021-08-05 · 59 added, 179 removed, 291 unchanged (45% of the section changed)

4 unchanged sentences

Current Assets:

Cash and cash equivalents

Short term investments

29 unchanged sentences

150,000,000 shares authorized;

‎ 14,260,285 shares issued and outstanding June 26, 2021;

‎ 14,304,635 shares issued and outstanding December 25, 2021;

‎ 14,271,335 shares issued and outstanding at September 25, 2021

1 unchanged sentence

‎ 100,000,000 shares authorized;

‎ 4,734,091 shares issued and outstanding June 26, 2021;

‎ 4,689,741 shares issued and outstanding December 25, 2021;

‎ 4,723,041 shares issued and outstanding at September 25, 2021

4 unchanged sentences

Retained earnings

1,048,860,750

Total Stockholders’ Equity

1,047,795,216

Total Liabilities and Stockholders’ Equity

8 unchanged sentences

Cost of goods sold

Operating and administrative expenses

Gain from sale or disposal of assets

Income from operations

Other income, net

Interest expense

Loss on early extinguishment of debt

Income before income taxes

Income tax expense

Other comprehensive expense:

Change in fair value of interest rate swap

1,040,985,244

Income tax benefit

Other comprehensive expense, net of tax

( 1,174,774 )

Comprehensive income

Per share amounts:

Class A Common Stock

Basic earnings per common share

Diluted earnings per common share

Class B Common Stock

Basic earnings per common share

Diluted earnings per common share

Cash dividends per common share

Class A Common Stock

Class B Common Stock

See notes to unaudited condensed consolidated financial statements.

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

Nine Months Ended

3,652,463,010

3,413,436,742

Cost of goods sold

2,690,309,051

2,539,638,667

Operating and administrative expenses

Gain from sale or disposal of assets

(Loss) gain from sale or disposal of assets

Income from operations

1 unchanged sentence

Interest expense

Loss on early extinguishment of debt

Income before income taxes

Income tax expense

Other comprehensive income (expense):

Other comprehensive income:

Change in fair value of interest rate swap

( 12,632,429 )

Income tax (expense) benefit

( 2,114,000 )

Other comprehensive income (expense), net of tax

( 9,548,415 )

Income tax expense

Other comprehensive income, net of tax

Comprehensive income

9 unchanged sentences

Class B Common Stock

See notes to unaudited condensed consolidated financial statements.

INGLES MARKETS, INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

THREE AND NINE MONTHS ENDED JUNE 26, 2021 AND JUNE 27, 2020

THREE MONTHS ENDED DECEMBER 25, 2021 AND DECEMBER 26, 2020

Comprehensive

8 unchanged sentences

Balance, December 26, 2020

Other comprehensive expense, net of income tax

( 8,162,558 )

( 10,525,534 )

Cash dividends

( 3,251,862 )

Common stock conversions

Balance, March 28, 2020

( 9,639,291 )

Other comprehensive expense, net of income tax

( 1,174,774 )

Cash dividends

( 3,252,032 )

Common stock conversions

Balance, June 27, 2020

( 10,814,065 )

Balance, September 25, 2021

7 unchanged sentences

( 2,015,253 )

Other comprehensive income, net of income tax

Cash dividends

1,048,860,750

1,047,795,216

Stock repurchases, at cost

( 1,265,400 )

( 12,311,249 )

( 67,624,069 )

( 79,998,588 )

Common stock conversions

Balance, March 27, 2021

( 3,056,682 )

Other comprehensive expense, net of income tax

Cash dividends

( 3,062,957 )

Stock repurchases, at cost

Common stock conversions

Balance, June 26, 2021

( 3,710,997 )

See notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended

Three Months Ended

Cash Flows from Operating Activities:

2 unchanged sentences

Non cash operating lease cost

Gain from sale or disposal of assets

( 3,644,501 )

( 4,411,539 )

Loss on early extinguishment of debt

Loss (gain) from sale or disposal of assets

Receipt of advance payments on purchases contracts

Recognition of advance payments on purchases contracts

( 2,203,915 )

( 3,329,682 )

Deferred income taxes

9 unchanged sentences

Accounts payable and accrued expenses

( 28,355,258 )

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities:

Proceeds from sales of property and equipment

Purchase of short term investments

( 110,007,106 )

Proceeds from sales of property and equipment

Capital expenditures

8 unchanged sentences

( 262,603,345 )

Proceeds from issuance of bonds

Debt issuance costs

( 5,239,937 )

Proceeds from new long term debt

Principal payments on long-term borrowings

1 unchanged sentence

( 3,890,502 )

Prepayment penalties on debt extinguishment

Dividends paid

( 3,063,227 )

Stock repurchases

( 3,252,152 )

Dividends paid

Net Cash Used by Financing Activities

( 6,522,366 )

( 21,026,724 )

Net Cash Provided (Used) by Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

( 42,669,131 )

Net Increase in Cash and Cash Equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Three Months and Nine Months Ended June 26, 2021 and June 27, 2020

Three Months Ended December 25, 2021 and December 26, 2020

BASIS OF PREPARATION

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the Company’s financial position as of June 26, 2021, and the results of operations and changes in stockholders’ equity for the three-month and nine-month periods ended June 26, 2021 and June 27, 2020, and cash flows for the nine months ended June 26, 2021 and June 27, 2020.

In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments necessary to present fairly the Company’s financial position as of December 25, 2021 and the results of operations and changes in stockholders’ equity and cash flows for the three months ended December 25, 2021 and December 26, 2020.

The adjustments made are of a normal recurring nature.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q.

It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September 26, 2020, filed by the Company under the Securities Exchange Act of 1934, as amended, on December 10, 2020.

The results of operations for the three-month and nine-month periods ended June 26, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.

It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Annual Report on Form 10-K for the year ended September 25, 2021, filed by the Company with the Securities and Exchange Commission on November 24, 2021.

The results of operations for the three months ended December 25, 2021 are not necessarily indicative of the results to be expected for the full fiscal year.

NEW ACCOUNTING PRONOUNCEMENTS

7 unchanged sentences

To the extent our debt and interest rate swap arrangements change to another accepted rate, we will utilize the relief in this ASU to continue hedge accounting.

SHORT TERM INVESTMENTS

The Company purchases financial products that can be readily converted into cash and the Company accounts for such financial products as short-term investments.

The financial products include money market funds, bonds and mutual funds.

The carrying values of the Company’s short-term investments approximate fair value because of their liquidity.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables are presented net of an allowance for doubtful accounts of $ 81,000 at June 26, 2021 and $ 325,000 at September 26, 2020.

Receivables are presented net of an allowance for doubtful accounts of $ 302,000 at December 25, 2021 and $ 157,000 at September 25, 2021.

The Company’s effective tax rate differs from the federal statutory rate primarily as a result of state income taxes and tax credits.

8 unchanged sentences

Interest payable

Income tax payable

Income taxes payable

Self-insurance liabilities are established for general liability claims, workers’ compensation and employee group medical and dental benefits based on claims filed and estimates of claims incurred but not reported.

The Company is currently insured for covered costs in excess of $ 1.0 million per occurrence for workers’ compensation and for general liability and $ 450,000 per covered person for medical care benefits for a policy year.

The Company’s self-insurance reserves totaled $ 33.7 million and $ 34.1 million at June 26,

2021 and September 26, 2020, respectively.

Of this amount, $ 13.9 million is accounted for as a current liability and $ 19.8 million as a long-term liability, which is inclusive of $ 4.8 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at June 26, 2021.

The Company’s self-insurance reserves totaled $ 32.1 million at both December 25, 2021 and September 25, 2021.

Of this amount, $ 13.4 million is accounted for as a current liability and $ 18.7 million as a long-term liability, which is inclusive of $ 4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable at December 25, 2021.

At September 25, 2021, $ 13.3 million was accounted for as a current liability and $ 18.8 million as a long-term liability, which is inclusive of $ 4.2 million of expected self-insurance recoveries from excess cost insurance or other sources that are recorded as a receivable.

Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 7.8 million and $ 9.4 million for the three-month periods ended June 26, 2021 and June 27, 2020, respectively.

For the nine-month periods ended June 26, 2021 and June 27, 2020, employee insurance expense, net of employee contributions totaled $ 28.2 million and $ 27.7 million, respectively.

Employee insurance expense, including workers’ compensation and medical care benefits, net of employee contributions, totaled $ 13.4 million and $ 12.3 million for the three months ended December 25, 2021 and December 26, 2020, respectively.

The Company’s fuel operations contain underground tanks for the storage of gasoline and diesel fuel.

1 unchanged sentence

The Company followed the FASB ASC 410 model for determining the asset retirement cost and asset retirement obligation.

The amounts recorded are immaterial for each fuel center as well as in the aggregate at June 26, 2021 and September 26, 2020.

The amounts recorded are immaterial for each fuel center as well as in the aggregate at December 25, 2021 and September 25, 2021.

LONG-TERM DEBT

In June 2021, the Company issued at par $ 350.0 million aggregate principal amount of senior 4.00 % notes due in 2031 (the “2031 Notes”).

Upon issuance of the 2031 Notes, the Company issued an irrevocable notice to redeem the remaining $ 295.0 million aggregate principal amount of its 5.75 % senior notes due in 2023 (the “2023 Notes”) and invested $ 295.0 million of 2031 Notes proceeds in short term investments pending redemption of the 2023 Notes.

The 2023 Notes were redeemed at par value on July 16, 2021.

Accordingly, at June 26, 2021 both $ 350.0 million of the 2031 Notes and $ 295.0 million of the 2023 Notes were outstanding, and the $ 295.0 million of 2023 Notes outstanding were included in the line item “Current portion of long-term debt” on the Condensed Consolidated Balance Sheet as of June 26, 2021.

In June 2021, the Company issued at par $ 350.0 million aggregate principal amount of 4.00 % senior notes due 2031 (the “Notes”).

The Company may redeem all or a portion of the Notes at any time at the following redemption prices (expressed as percentages of the principal amount), if redeemed during the 12-month period beginning June 15 of the years indicated below:

2029 and thereafter

In November 2019, the Company closed a $ 155 million ten year amortizing real estate loan (the “Loan”) and issued notice to redeem a like principal amount of the 2023 Notes.

The Loan was funded and the 2023 Notes were redeemed thirty days after the redemption notice in December 2019.

The 2023 Notes were redeemed at 101.917 % of par value, and the Company recognized debt extinguishment costs of approximately $ 3.7 million during the quarter ended December 28, 2019.

The Loan matures January 31, 2030 and has monthly principal payments of $ 0.65 million plus floating rate interest based on LIBOR.

In June 2020, the Company issued an irrevocable notice to redeem $ 150 million principal amount of the 2023 Notes.

The 2023 Notes were redeemed at 100.958 % of par value on July 9, 2020.

In July 2020, the Company issued an irrevocable notice to redeem $ 100 million principal amount of the 2023 Notes.

The 2023 Notes were redeemed at 100.958 % of par value on August 27, 2020.

In June 2021, the Company entered into a $ 150.0 million line of credit (the “Line”) that matures in June 2026 .

The Company had a $ 175.0 million line of credit that was scheduled to mature in September 2022 .

In June 2021, the Company replaced that line by entering into a $ 150.0 million line of credit (the “Line”) that matures in June 2026 .

The Line provides the Company with various interest rate options based on the prime rate, the Federal Funds Rate, or LIBOR.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at June 26, 2021.

The Line allows the Company to issue up to $ 10.0 million in letters of credit, of which none were issued at December 25, 2021.

The Company is not required to maintain compensating balances in connection with the Line.

At June 26, 2021, the Company had no borrowings outstanding under the Line.

At December 25, 2021, the Company had no borrowings outstanding under the Line.

In December 2010, the Company completed the funding of $ 99.7 million of bonds (the “ Bonds”) for construction of new warehouse and distribution space adjacent to its existing space in Buncombe County, North Carolina (the “Project”).

The final maturity date of the Bonds is January 1, 2036 .

Under a Continuing Covenant and Collateral Agency Agreement (the “Covenant Agreement”) between certain financial institutions and the Company, the financial institutions would hold the Bonds until September 2026, subject to certain events.

Mandatory redemption of the Bonds by the Company in the annual amount of $ 4.5 million began on January 1, 2014 .

The outstanding balance of the Bonds is $ 63.5 million as of June 26, 2021.

The Company may redeem the Bonds without penalty or premium at any time prior to September 26, 2026 .

The outstanding balance of the Bonds was $ 63.5 million as of December 25, 2021.

The Company may redeem the Bonds without penalty or premium at any time prior to December 17, 2029 .

The Covenant Agreement was amended during the quarter ended December 25, 2021 to extend the holding period and reduce the interest rate on the Bonds.

Interest earned by bondholders on the Bonds is exempt from Federal and North Carolina income taxation.

12 unchanged sentences

The Company has designated the swaps as cash flow hedges and records the changes in the estimated fair value of the swaps to other comprehensive income each period.

For the three- and nine-month periods ended June 26, 2021, the Company recorded $ 0.7 million of other comprehensive expense and $ 6.5 million of other comprehensive income, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 4.9 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of June 26, 2021.

For the three- and nine-month periods ended June 27, 2020, the Company recorded $ 1.2 million and $ 9.5 million of other comprehensive expense, respectively, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 14.3 million are recorded as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of June 27, 2020.

For the three months ended December 25, 2021, the Company recorded $ 1.4 million of other comprehensive income, net of income taxes, in its Consolidated Statements of Comprehensive Income.

Unrealized losses of $ 2.7 million are included as a liability at fair value in the line “Other Long Term Liabilities” on the Consolidated Balance Sheet as of December 25, 2021.

For the three-month period ended December 26, 2020, the Company recorded $ 2.1 million of other comprehensive income, net of income taxes, in its Consolidated Statements of Comprehensive Income.

The Company’s long-term debt agreements generally contain provisions that under certain circumstances would permit lending institutions to terminate or withdraw their respective extensions of credit to the Company.

Included among the triggering factors permitting the termination or withdrawal of the Line to the Company are certain events of default, including both monetary and non-monetary defaults, the initiation of bankruptcy or insolvency proceedings, and the failure of the Company to meet certain financial covenants designated in its respective loan documents.

The Company was in compliance with all financial covenants at June 26, 2021.

The Company was in compliance with all financial covenants at December 25, 2021.

The Company’s long-term debt agreements generally have cross-default provisions which could result in the acceleration of payments due under all long-term debt agreements in the event of default under any one instrument.

At June 26, 2021, property and equipment with an undepreciated cost of approximately $ 298.5 million was pledged as collateral for long-term debt.

At December 25, 2021, property and equipment with an undepreciated cost of approximately $ 277.4 million were pledged as collateral for long-term debt.

Long-term debt and Line agreements contain various restrictive covenants requiring, among other things, minimum levels of net worth and maintenance of certain financial ratios.

At June 26, 2021, the Company had excess net worth totaling $ 202.6 million calculated under covenants in the 2031 Notes, the Bonds, the Loan, and the Line.

At December 25, 2021, the Company had excess net worth totaling $ 267.1 million calculated under covenants in the Bonds, the Loan, and the Line.

This amount is available to pay dividends;

3 unchanged sentences

The Company paid cash dividends of $ 0.165 for each share of Class A Common Stock and $ 0.15 for each share of Class B Common Stock on October 14, 2021 to stockholders of record on October 7, 2021 .

The Company paid cash dividends of $ 0.165 for each share of Class A Common Stock and $ 0.15 for each share of Class B Common Stock on January 14, 2021 to stockholders of record on January 7, 2021 .

The Company paid cash dividends of $ 0.165 for each share of Class A Common Stock and $ 0.15 for each share of Class B Common Stock on April 15, 2021 to stockholders of record on April 8, 2021 .

For additional information regarding the dividend rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements of the Annual Report on Form 10-K filed by the Company under the Securities Exchange Act of 1934, as amended, on December 10, 2020.

For additional information regarding the dividend rights of the Class A Common Stock and Class B Common Stock, please see Note 8, “Stockholders’ Equity” to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission on November 24, 2021.

EARNINGS PER COMMON SHARE

10 unchanged sentences

Three Months Ended

Nine Months Ended

June 26, 2021

Allocated net income

Net income allocated, basic

Conversion of Class B to Class A shares

Net income allocated, diluted

Weighted average shares outstanding

Weighted average shares outstanding, basic

Conversion of Class B to Class A shares

Weighted average shares outstanding, diluted

Earnings per share

Three Months Ended

Nine Months Ended

June 27, 2020

December 25, 2021

December 26, 2020

Allocated net income

10 unchanged sentences

The initial terms of the leases are generally 20 years.

The majority of the leases includes one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises.

The majority of the leases include one or more renewal options and provide that the Company pay property taxes, utilities, repairs and certain other costs incidental to occupation of the premises.

Several leases contain clauses calling for percentage rentals based upon gross sales of the supermarket occupying the leased space.

Step rent provisions, escalation clauses and lease incentives are taken into account in computing minimum lease payments.

Operating lease cost for all operating leases totaled $ 2.7 million for the three months ended June 26, 2021 and $ 8.4 million for the nine months ended June 26, 2021.

Operating lease cost for all operating leases totaled $ 2.6 million for the three months ended December 25, 2021.

This amount includes short-term (less than one year) leases, common area expenses, and variable lease costs, all of which are insignificant.

Cash paid for lease liabilities in operating activities approximates operating lease cost.

Maturities of operating lease liabilities as of June 26, 2021 are as follows:

Maturities of operating lease liabilities as of December 25, 2021 are as follows:

Remainder of 2022

2 unchanged sentences

Present value of lease liabilities

On the Condensed Consolidated Balance Sheets, lease extensions exercised less leased properties purchased during fiscal year 2021 increased the line items “Operating lease right of use assets” and “Noncurrent operating lease liabilities” by $ 1.6 million each during the nine months ended June 26, 2021.

The weighted average remaining lease term for the Company’s operating leases is 13.4 years.

The weighted average discount rate used to determine lease liability balances as of June 26, 2021 is 3.51 %, based on the most recent Company financings collateralized by store properties.

The weighted average discount rate used to determine lease liability balances as of December 25, 2021 is 3.51 %, based on recent Company financings collateralized by store properties.

Leases as Lessor

At June 26, 2021, the Company owned and operated 84 shopping centers in conjunction with its supermarket operations.

At December 25, 2021, the Company owned and operated 83 shopping centers in conjunction with its supermarket operations.

The Company leases to others a portion of its shopping center properties.

3 unchanged sentences

Three Months Ended

Nine Months Ended

June 26, 2021

December 25, 2021

Rents earned on owned and subleased properties:

2 unchanged sentences

( 1,463,937 )

( 3,693,739 )

Other shopping center expenses

( 2,199,072 )

Future minimum operating lease receipts at June 26, 2021 are as follows:

Future minimum operating lease receipts at December 25, 2021 are as follows:

Remainder of 2022

5 unchanged sentences

Three Months Ended

Nine Months Ended

Revenues from unaffiliated customers:

7 unchanged sentences

The perishables category includes meat, produce, deli and bakery.

For the three-month periods ended June 26, 2021 and June 27, 2020, the fluid dairy operation had $ 11.1 and $ 11.2 million in sales, respectively to the grocery sales segment.

The fluid dairy operation had $ 34.8 million and $ 35.0 million in sales to the retail grocery segment for the nine-month periods ended June 26, 2021 and June 27, 2020, respectively.

For the three-month periods ended December 25, 2021 and December 26, 2020, respectively, the fluid dairy operation had $ 12.6 million and $ 12.3 million in sales to the grocery sales segment.

These sales have been eliminated in consolidation and are excluded from the amounts in the table above.

FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The carrying amounts for cash and cash equivalents, short term investments, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The fair value of the Company’s debt and interest rate swaps are estimated using valuation techniques under the accounting guidance related to fair value measurements based on observable and unobservable inputs.

10 unchanged sentences

The inputs into the determination of fair value require significant management judgment or estimation.

The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at June 26, 2021 were as follows (in thousands):

2023 Senior Notes

2031 Senior Notes

The carrying amount and fair value of the Company’s debt, interest rate swaps, and non-qualified retirement plan assets at December 25, 2021 are as follows (in thousands):

Facility Bonds

7 unchanged sentences

RELATED PARTY TRANSACTIONS

On March 19, 2021, the Company’s Board of Directors authorized the repurchase of up to an aggregate of 2.0 million shares of its Class A and Class B Common Stock.

The share repurchase program may be carried out through open market purchases, block trades, purchases from the Company’s Investment/Profit Sharing Plan and in negotiated private transactions.

On March 23, 2021, the Company approved the repurchase of 1.3 million shares of the Company’s Class B Common Stock from a trust that is part of the estate of Robert P.

Ingle, former CEO and Director of the Company.

The aggregate purchase price paid for the repurchased shares was approximately $ 80.0 million, which was equal to the fair market value of the Company’s publicly traded Class A Common Stock at the time of the transaction.

The transaction was approved by the Company’s Executive Committee and Audit Committee in accordance with the Company’s related-party transaction policy and regulatory guidelines.

The Company will from time to time make short-term non-interest bearing loans to the Company’s Investment/Profit Sharing Plan to allow the plan to meet distribution obligations during a time when the plan was prohibited from selling shares of the Company’s Class A Common Stock.

During the nine months ended June 26, 2021, such a loan in the amount of $ 0.4 million was both made and repaid in full.

During the three months ended December 25, 2021, there were no such loans made, repaid or outstanding.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements